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Ryanair CEO Michael O'Leary: 'The EU recession, higher oil prices, the unfolding failure of the package tour operator model, significant competitor fare increases and capacity cuts, has created enormous growth opportunities for Ryanair.' (Reuters/Reuters)
Ryanair CEO Michael O'Leary: 'The EU recession, higher oil prices, the unfolding failure of the package tour operator model, significant competitor fare increases and capacity cuts, has created enormous growth opportunities for Ryanair.' (Reuters/Reuters)

Ryanair boosts full-year profit forecast Add to ...

Ryanair, Europe’s biggest budget airline, raised its full-year profit forecast on Monday as a 17-per-cent rise in fares made up for more expensive fuel and reduced capacity.

Underlining the resilience of the low-cost sector as legacy carriers struggle, Ryanair soared past analyst forecasts with a net profit of €15-million ($19.8-million) in its third quarter to Dec. 31.

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Its shares, which have gained 35 per cent in the past five months, outpacing the broader Irish market, hit a four-year high initially and closed 0.9 per cent higher at €4.19.

The higher fares made up for a 2-per-cent drop in passenger numbers as the airline grounded 80 of its 270 planes over the winter due to high fuel costs.

“Ryanair is doing so well because it can increase its fares and still be lower than the competition,” said Gerard Moore, an analyst with Merrion stockbrokers in Dublin.

“Cutting capacity more aggressively than its rivals gives it even more scope to increase average fares and this strategy is paying off.”

Ryanair followed British peer easyJet PLC in posting strong revenue growth as higher-priced rivals are battered by fuel costs and a struggling global economy.

German group Deutsche Lufthansa AG and Air France-KLM have cut profit forecasts after being hit by fuel cost rises and slashed plans to expand in 2012.

Ryanair’s revenue was €844-million in the quarter, ahead of an average forecast of €819-million in a poll of 21 analysts compiled by the company. Quarterly net profit of €15-million was well ahead of a €16-million loss forecast.

It increased its full-year net profit forecast by 9 per cent to €480-million.

“The EU recession, higher oil prices, the unfolding failure of the package tour operator model, significant competitor fare increases and capacity cuts, has created enormous growth opportunities for Ryanair,” chief executive officer Michael O’Leary said.

Ryanair is examining opportunities in Spain following the collapse last week of loss-making rival Spanair, chief financial officer Howard Millar said.

“We certainly see it as an opportunity to expand our base,” he said.

One cloud on the horizon is the fuel bill, which Ryanair is forecasting will increase by €350-million in its next financial year, which runs from April, 2012, to March, 2013. That poses a significant cost challenge, but does not necessarily mean profit growth will slow, Mr. Millar said.

“So far we have been able to pass on higher fuel charges to passengers in the form of higher fares. So far so good, but one never knows,” he said.

The company’s annual report puts its fuel bill for the 12 months to March 31, 2011, at €1.2-billion.

Ryanair expects passenger numbers to grow to 80 million passengers in 2011 from 76 million in 2010.

Ryanair, which in 2010 paid its first dividend since being floated 15 years ago, has not changed its plans to dish out a substantial dividend of up to €500-million next year, but Mr. O’Leary said he was “nearly certain” that if that proved to be the case, another payment would not be forthcoming in 2014.

“I am very reluctant that we don’t get ourselves into this having an annual dividend policy and listening to shareholders whining on about our dividend not being significant enough,” he told an analyst call.



Reuters

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